Ramifications of the Edward Jones 401(k) Lawsuit

edward-jonesLast month, the media reported that Edwards Jones is being sued by a company participating in their 401(k) plan for purportedly making employees pay high fees for investment management and record keeping services. These fees allegedly cost millions in retirement savings.

The intricacies of this case are long and unique and create a bit of a quandary within the financial services market. One of the interesting back stories of the case surrounds how the relationship between Edward Jones and the mutual fund companies might have influenced the choice of 401(k) plans.

The organization has two levels of partnerships, namely partners and preferred partners. It has been reported that when preferred partners are “kept happy” there is a financial benefit for Edward Jones. The suit also alleges that the preferred partners receive millions in revenue sharing payments in return for providing fund managers greater access to information about business practices, additional marketing support and educational presentations, and increased interaction with financial advisors at Edward Jones.

These allegations suggest that because of their relationship, funds from the preferred partners are being included in the Edward Jones employee 401(k) plans. It is also interesting to note that of the 53 separate investment options in the employee 401(k) plans, 40 are managed by an Edward Jones partner or preferred partner. The lawsuit suggests that because of these relationships, the firm profits through revenue sharing arrangements from the product partner.

It will be interesting to see how this lawsuit plays out and what effect it might have on future cases. We believe it could open a floodgate of similar suits and that this is just the tip of the iceberg.  The bottom line in all of this is to work with an advisor who follows the fiduciary standard and you won’t run into these situations.


About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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